Notes From Underground: An Addendum to the German Elections

As we await the outcome of the German elections in September, we at Notes From Underground would like to point out a few posts in which we alluded to the German elections. The first one is from June 2010, after the defeat of Chancellor Merkel’s candidate for German President, Christian Wulff.

The revelation: she leaves a sour taste in the mouths of Germans.

Chancellor Merkle’s hand-picked candidate for German president, Christian Wulff, did not receive a majority of votes in the 1,244-member assembly of federal lawmakers–similar to the electoral college in the U.S.–and will have to go on to further ballots. Wulff had 600 of the needed 623, thus keeping the opposition candidates alive. If any of the candidates fail again to achieve the needed majority, then the process goes to a third ballot in which the candidate with most votes wins.

We believe that Merkel’s candidate will prevail but the failure on the first vote is a slap at the chancellor. The meaning of this slap is that it makes the German Government bailouts of the PIIGS that much more problematic as the German public is growing tired of sending its money to the profligate. The internal opposition to further bailouts is the real threat to sovereign solvency within the EU. It is not the strikers in the peripherals, as significant as that may be, but the rise of opposition in Germany to sustained money transfer. We continue to say that the real TEA PARTY people are in Germany and there in lies the rub. We also note that the EURO has held up very well today in spite of this news. However, one day on month-end/quarter-end doth not make a trend but does reflect on the U.S. DOLLAR. The problems in the developed world are immense –no nation seems to have escaped. It’s just a matter of what seems to be the flavor of the day.

In a more recent post from April 28, we said, “the question that is framing the most recent debate in European circles is the one asked by Bernard Connolly for the last 18 years: Whose currency is the euro and who controls its outcome?” Click the link below for a refresher while we wait for the listless markets to wake.

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This entry was posted on August 6, 2013 at 8:53 pm and is filed under Germany. You can follow any responses to this entry through the RSS 2.0 feed.
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3 Responses to “Notes From Underground: An Addendum to the German Elections”

I find myself in more or less complete agreement with Quentin Peel, writing in the Financial Times recently, as follows:

“SPD policy makers say they would be “more Keynesian”. They would no doubt fight to take over the finance ministry from Wolfgang Schaüble as the price of their participation in power. But they would share his hostility to any banking resolution scheme financed by domestic taxpayers – without a German veto. They want it financed by the banks themselves.
The priority for SPD voters is to spend their money on relieving social pressures, and investing in infrastructure, at home. There will be no deficit spending. The party favours a jointly guaranteed debt redemption scheme for the eurozone, but it has gone very cool on the idea of eurozone bonds.
The truth is that unless there is a big policy shift, then whoever wins in Berlin there will be no rush to reform in the rest of the eurozone, especially if that means treaty change. And Berlin won’t move on anything as controversial as a common bank resolution fund, or eurozone bonds, without treaty change.
European elections in 2014, plus municipal elections in France, the appointment of a new European Commission and then British elections in 2015, all point to prolonged postponement of any serious change in the governance of the eurozone or the European Union.
There will be a one-year respite in 2016, before a potential “perfect storm” in the electoral cycle in 2017, with both France and Germany back at the polls – and the UK possibly holding a referendum on EU membership. So 2016 will be the one time when a treaty change might be contemplated.”

Markets – and policymakers – be watchful… markets might not wait this long.